I was interested in cloud mining. That is why I decided to calculate what I could make buying an ethereum mining contract at gm.
Step 1.
I started by looking at how much an 1m/h contract would cost me. At the time of writing this post, it would cost me 30USD. Wich would translate to 0.114725847 Ether. Keep this number in mind.
Step 2.
The second thing I did was write down the difficulty of Ethereum mining at every first of the month starting from 2015-08-01.
Step 3.
I calculated the percentage the difficulty increased every month. And calculated an average of 26% a month. Keep in mind that this average is much higher looking at the last few months.
Step 4.
I then took the latest know difficulty and added 26%. I did the same for the coming months to make a rough prediction to what the difficulty would be in two years.
Step 5.
The last thing I did was take all the difficulty's of each month and calculated how much Ether I would get that month. I then took all of the ether rewards for a 2 year period and added them all together. This results in a net reward of 0,11333144 Ether.
Note: This is less that what a two year mining contract would cost me.
Conclusion:
I would be better off saving all of my ether. A mining contract would cost me more that the return would be. And this is with the difficulty increasing with 26%. I think that the difficulty that I calculated for each month could be even higher. That is why I decided not to invest in a mining contract.
Iff you guys disagree with me, please let me know.
p.s.
Even iff my calculations are off. Ethereum will change to POS in the future with leaves me with a contract that can't be used anymore.
I agree with your analysis but it isn't the whole story. Mining has some built-in hedging effects against weak performance of the mined commodity. So people might agree with your calculation and still do contract mining. For example, while it is true that in the current rising market, you probably won't make your investment back in terms of the mined currency, consider the case that the mined token/currency performs badly. If the $ price of Ether is flat while you are mining it the difficulty will grow much slower since there is less incentive to develop better hashing technology and also less incentive to go out and buy more rigs. Because the difficulty is growing slower you may well make a profit, both in Ether and $. In the case where the currency is growing you won't make a profit in the currency (Ether) but you will in the base currency, i.e. $. Was it true in your case? Was mining profitable if you only considered your local non-crypto base currency?
I was able to understand exactly what you meant, and wanted to say that I very much appreciate your post. It was simple, clear, and concise, and made a strong point.
More posts should follow this exact model.
Thanks!
Off course it depends on the goal.
If you think as a short term investor (less than a year) - while it looks break-even and you better buy Ether now and wait. Also to avoide liquidity issue.
In long term - by mining you are getting source of ether no matter what - price volatility (hugely up/down) - Ehter is not a currency - it is a commodity - fuel for applications in the network.
If you think as an enthusiast of blockchain - by mining you are supporting network, helping to run transactions faster - kind of social responsibility.
Out of 4 outcomes (0-0, 1-0, 0-1,1-1) I'd choose the last one buy and mine.
This is true, it does contribute to the Ethereum network. Though I think most of the people buy the contracts for the profit that they think they will get. That's why I wrote this post. Iff your in this space for the profit. The mining contract won't get you any.
Congratulations @mrtiotio! You have completed some achievement on Steemit and have been rewarded with new badge(s) :
Click on any badge to view your own Board of Honnor on SteemitBoard.
For more information about SteemitBoard, click here
If you no longer want to receive notifications, reply to this comment with the word
STOPIf you want to support the SteemitBoard project, your upvote for this notification is welcome!
Ether contract is a scam. lols.